The Nigerian Financial Intelligence Unit (NFIU) has rolled out guidelines to ensure direct allocation of funds to local governments from the Federation Account and ensure financial autonomy. But some stakeholders say the guidelines are unconstitutional, ADEBISI ONANUGA reports
The Nigerian Financial Intelligence Unit (NFIU) has wielded the big stick against in-coming governors. The agency, a couple of weeks ago, barred governors from interfering with statutory allocations accruing to the local governments directly from the Federation Account.
To achieve this, it drew up new guidelines titled: ‘NFIU enforcement and guidelines to reduce crime vulnerabilities created by cash withdrawal from Local Government funds throughout Nigeria’. The guidelines take effect from June 1, 2019.
The guidelines impose a daily N500,000 cash transaction limit on all the 774 local governments.
It will also bar banks, financial institutions, public officers and other stakeholders from tampering with local government statutory allocations.
The NFIU vowed to deal with individuals and firms abetting the diversion of the funds. It warned that defaulters will face international and local sanctions, such as “likely blacklist of erring governors and the Chief Executive Officers of the affected banks; shutdown of any erring bank; and watch-list of violators in 160 countries where they cannot transact business or pay bills.”
Why the new guidelines?
According to the NFIU, the rules followed intelligence reports tracing local governments’ funds to Bureaux de Change.
The guidelines were also said to be in response to threats of isolation of the country’s financial system by international financial systems due to deficiencies in our anti-money laundering and counter-terrorism financing implementation and measures.
NFIU’s Chief Media Analyst Mr. Ahmed Dikko noted, in a statement, that although the basic aim of the guidelines is to protect local government allocations, there were deeper benefits.
The implication of protecting LGA allocations, Dikko explained, is that funds from the Federation Account, will henceforth, go directly into every local government statutory account, meaning that LGAs would be free to spend their funds without taking directives from governors who have hijacked their monthly allocations under the guise of State Joint Local Government Accounts.
Dikko said: “The NFIU requests all financial institutions, other relevant stakeholders, public servants and the entire citizenry to ensure full compliance with the provisions of the guidelines already submitted to financial institutions and relevant enforcement agencies, including full enforcement of corresponding sanctions against violations from 1st June, 2019.”
‘The guidelines are backed by NFIU Act’
The agency said the guidelines are in accordance with its legitimate powers under the NFIU Act 2018 and that any violations of the guidelines would be sanctioned appropriately.
“We observed isolated comments to the contrary in the past few days which in our assessment only amounted to wilful misinterpretation of the 1999 Constitution and, therefore, of no consequence to the operations of the entire financial system,” Dikko said.
He stated that the directive was sequel to findings which indicated that cash withdrawals and transactions of the State and Joint Local Government Accounts posed the “biggest corruption, money laundering and security threats at grassroots level and to the entire financial system and the country as a whole”.
The anti-graft agency further explained that the measures were necessitated by the threats of isolation of the Nigerian financial system by other international financial systems for the deficiencies in the nation’s anti-money laundering and counter-terrorism financing implementation.
Statistics back NFIU’s claims on corruption
According to data from the office of theAccountant-General, N14,708,838,964,375.70 was allocated to the 774 local governments between 2008 and 2018, and larger percentage of this allocation has been diverted by governors into the state account and misappropriated by the governors.
The data revealed the top five states with the highest amount of allocation to their local governments during the period reviewed included Kano, which received the highest allocation amounting to N832.6 billion, Lagos – N829.6 billion, Katsina – N613.4 billion, Oyo– 569.6 billion, and Kaduna– N504.9 billion.
The five states, whose local governments have received the lowest allocation in the past 10 years are Bayelsa – N167 billion, Gombe – N219.4 billion, FCT – 226.8 billion, Ebonyi – N230.9 billion, and Nasarawa – 240.4 billion.
It was reported at a United Nation (UN) conference in New York last Friday, that Africa loses about $80 billion yearly through Illegal Financial Flows (IFFs), including illegal movements of money or capital from one country to another through tax evasion, money laundering and smuggling.
Nigeria reportedly accounted for $17 billion or 21 per cent of the figure.
The development, it was said, prompted Nigeria to push for the international community to simplify the process of tracing, recovering and repatriating IFFs to their countries of origin.
The Independent Corrupt Practices and Other Related Offences Commission (ICPC) Chairman, Prof. Bolaji Owasanoye, presented Nigeria’s position at the UN conference, which was themed, “International Cooperation to Combat Illicit Financial Flows (IFFs) and Strengthen Good Practices on Assets Return.”
Owasanoye said Nigeria was, particularly, concerned about the challenges posed by the increasing scope and complexity of IFFs and the slow pace of the process of recovery and return of assets of illicit origin.
He said IFF is a shared concern that requires global solution, strong political will and support by governments of destination countries to combat.
Guidelines can end ‘60 per cent of corruption in Nigeria’
The guidelines have received favourable response from the National Assembly.
The Senate on May 8 adopted a motion moved by Senator Sabi Abdullahi (Niger North) over the NFIU guidelines. The Upper Chamber adopted a motion asking the Presidency, state Houses of Assembly and relevant stakeholders to expedite action on financial autonomy for all the 774 Local Government Councils in the country.
The Senate enjoined the 36 state governments and the Federal Capital Territory (FCT), to fully support the implementation of the guidelines to promote good governance at the local government areas and restore governance at the grassroots levels.
Abdullahi argued that it would reinforce the existence of the local government as an independent government established by the Constitution at the grassroots level with sovereign and elected officials.
Deputy Leader of the Senate, Senator Bala Ibn Na’alla, said: “If we succeed in executing this, 60 per cent of corruption in Nigeria will be resolved. This will be a major landmark, if the Senate decides to follow through its resolution.
“Let all financial institutions agree, and all of us agree that we must follow these guidelines and let the local governments be autonomous.’’
Deputy Senate President and Chairman of Senate Committee on Constitution Review, Senator Ike Ekweremadu, also approved the NFIU’s move.
He suggested the amendment of various sections of the Constitution to grant full autonomy to local governments to prevent in-coming governors from challenging the new development in court
Guidelines evidence of renewed anti-graft war, say unions
Trade unions, including the National Union of Local Government Employees (NULGE) and the Trade Union Congress (TUC), have also lent support to the new regulations, believing they will help curb reckless spending of LGA funds by governors.
NULGE National President Comrade Ibrahim Khaleel said in Abuja last week that the regulation was an indication of the renewed fight against corruption by the President Muhammadu Buhari-led government.
“As a union, we will work with the relevant agencies of the Federal Government to ensure the successful implementation of the guidelines,” he said.
TUC President Bobboi Kaigama said the union supported the circular.
He said: “Cash transactions and withdrawals of the states from Joint LG Accounts is a threat to development at the grassroots; in fact, it even fans the embers of insecurity and major crisis, etc.”
The case against NFIU guidelines
But other stakeholders have faulted the guidelines, arguing that they infringe on states’ constitutional power, among other reasons.
The Lagos State government said the Federal Government had no business allocating money to the local governments directly. It said such funds should be given to the states to determine how it would be disbursed.
The Secretary to the Lagos State Government (SSG), Tunji Bello, receiving Senior Executive Course participants of the National Institute for Policy and Strategic Studies, (NIPSS) in his Ikeja office last Tuesday, maintained that the Federal Government should not dabble into the affairs of the local governments.
“The federation is between the federal and the states that is why the constitution must be amended to reflect that the federal and state should determine allocations. The money should be shared between federal and the state,” Mr Bello said, citing practices in countries, such as Germany and the U.S.
Bello said local governments were tied to the states and, therefore, the states should decide how they (LGAs) should spend their money. The Federal Government should not jump the state and start dealing with LGAs directly.
He said the Federal Government is carrying some responsibilities that should have been left for the states to manage.
He noted that many Nigerians have faulted the country’s federal system because power is mostly rested at the centre and that this has resulted in calls for restructuring.
Bello maintained that every state should tap its own resources “and now pay dues to the federal government”.
“We have several agencies that are not useful, while some which are supposed to be left for the states are overburdened.
Bello also said it is better for states to manage all affairs within its territory than for “you to sit down in Abuja and say how the police commissioner should run a station in Ajah in Lagos”.
“That’s why we have security problems in Nigeria. Even the issue of policemen should be managed by the states. The Nigerian Army is overburdened already and the police cannot manage the security of Nigeria anymore because they are overstretched.
“We have enough unemployment in the country. Do you know the kind of employment Katsina, Benue and Kebbi can generate, the number of people we can employ in Lagos if states are allowed to fully manage their resources?”
Lagos State’s views were similar to that of Ekiti State.
Ekiti State Governor, Kayode Fayemi also faulted the new financial guidelines put in place for local government areas by the NFIU, describing the document as “unconstitutional and unenforceable”.
He said the imposition of the guidelines on states amounted to a recourse to a unitary system.
Fayemi insisted that local governments are under the control of states by the provisions of the 1999 Constitution.
“The Nigerian constitution only recognises a Federation of two federating units – federal and state government and local government areas – are under the supervision of states and my own personal campaign is that they should be expunged from the constitution because there is no reason to list local government in the constitution.
He said the imposition of the guidelines on states amounted to a recourse to a unitary system.
“ It should be the business of each state as a federating unit of coordinate jurisdiction to decide how many LGs to have and how to ensure they deliver services to their citizens,” he contended.
But, to analysts, the issue of joint account of states and LGAs has been the crux of the debate over local government financial autonomy and independence as the third level of government. They argued that it would be difficult for local to deliver dividends of democracy to the people as long as state governors are in charge of their funds. Over time, successive local government administrations have complained that the practice whereby the states were allowed to take control of their financial allocations from the Federation Account was undemocratic and also prone to abuse by governors.
How the system operates abroad
Who controls council funds in a truly federalist country? The NFIU guidelines won’t work in the United States of America (USA), for instance, or Switzerland.
The 50 states in the US have control over the LGAs in their domains, free of interference from the central government in Washington DC. The United States Census Bureau said that as of 2012, there were 89,004 LGAs in America, consisting of municipalities, counties, township governments and special purpose-LGs.
Similarly, under Switzerland’s 1848 federal constitution, the central government and the cantons (states) are the federating units. Consequently, the cantons define the powers of their communes (or councils), which are 2,300 in all.
Lawyers reaction
Reactions from lawyers on the new NFIU guidelines has also been that of a mixed grill.
A Law lecturer at the University of Lagos (UNILAG) Wahab Shittu said the true test of federalism is reflected in fiscal federalism and devolution of powers to the federating units in the federation. According to him, the NFIU directive is “cheering news” and is in furtherance of the federalist philosophy.
“Hitherto Local Governments were emasculated as they grapple with peanuts with resultant negative development indicators. This narrative is now likely to change with prospects of development brighter. It will translate into greater accountability and transparency in the management of local funds. We now know who to hold responsible for mismanagement of local government funds.
“It will also trigger increased tempo of activities at the local government level with the best hands attracted to come on board.
“Grassroots development will be enhanced as more funds become available for critical infrastructures and other services. Indeed a new era is born,” Shittu said.
According to him, “Section 7 of the constitution guarantees the system of local Government Administration. These guidelines will strengthen the efficacy of section 7 of the constitution.
“It will seem that section 162 (6) and (8) will have to be amended for the new guidelines. This is the urgent task of the 9th Assembly”, he added.
Former Second Vice President of the Nigerian Bar Association (NBA), Monday Ubani also backed the NFIU.
According to him, the guidelines will ensure that local government funds are spent to develop local government council areas.
Contrary to arguments by some state government, Ubani said the local governments are not the creation of the states, but that of the National Assembly. He recalled that when the Bola Tinubu administration created new local governments in Lagos State, the Olusegun Obasanjo-led Federal Government did not accept the new creations and that that was why they ended as Local Council Development Authorities (LCDAs).
“The issue is that we must look at the spirit and letters of the Constitution, particularly that section of the law that places local government funds from Federation Account into Joint Local Government Account. What was the reason for that? It is to ensure that money from the Federation Account gets to the local governments to enable them carry out their responsibilities under the Constitution”.
Ubani said the governors have perfected the act of stealing their money under the joint account. According to Section 162 of the Constitution, he said state governments were supposed to contribute their revenue into that joint account to develop the council areas but have not being doing that. “So the purpose of the money in that account is for the development of the local government”.
He said “governors have not allowed the local governments to develop because they don’t allow elective officers to stay in office. Rather, they prefer to appoint Care taker Committee into office and thereby prevent elections from holding. So they only give the Caretaker Committee money to pay salaries and the rest they squander. This is the reason why there is no development in the local governments because of the misappropriation of the funds by the governors.
“They must give life to the spirit of the constitution. If any bank allowed the governors to access the funds in the local government joint account, that bank should be sanctioned as stated in the NFIU guidelines.
“I urge Nigerians, the judiciary, the National Assembly, EFCC to support the guidelines issued by the NFIU. It is not a breach of the Constitution. Governors are only kicking because of their selfishness.
“Let the policy implementers be warned in advance that the State Governors will be planning now how to compromise them and ensure that this policy suffers irreparable setback. They will be planning in conjunction with the Transition Council Chairmen how to observe this new policy in breach.
“For effective implementation, the Presidency, EFCC and NFIU must collaborate to ensure full compliance and implementation, with EFCC monitoring how the Local Government Chairmen will utilise these funds to develop the local government Areas across the nation,”he said.
But a member of Ogun State Judiciary Service Commission, Abayomi Omoyinmi, differed.
Omoyinmi argued that the guidelines will serve no purpose and may achieve little or nothing, taking into consideration the provision of the law as enshrined in the constitution.
“The constitution is the supreme law of the land and any guideline/guidelines issued in contradiction of same is of no effect. The only way out for the local government to attain financial autonomy is if the present provision of the Constitution Section 7 and Section 162 (6) (8) of the 1999 constitution is amended by the National Assembly or by judicial decision of courts as in the case of Judiciary financial autonomy,” he said. (The Nation)
